ICELAND, Garðabær. Strong orders were received. The margins are impacted by logistics and mobility challenges as the pandemic escalated. The profitability was hampered by step up in sales and service coverage and strategic improvement.
The company started the year on a strong note with orders received of € 369 mill., compared to the previous record orders of € 352 mill. in 1Q 2020. The dynamics this year are different. While 2020 started strong and slowed down from March onwards, 2021 started slow but really took off in March and the outlook is positive.
Marel is stepping up investments in local sales and service coverage around the world and continues to innovate and introduce new revolutionary solutions focused on the consumer-ready market. Automation and digital solutions in the food value chain continue to be key drivers for the industry, and Marel is well positioned to support the food industry to prepare for shifting market dynamics and change in consumer behavior.
In China the company secured a large greenfield project with Muyuan Group, the world’s second largest pig breeder. The project consists of several lines replicated across multiple locations to ensure a harmonized way of working and seamless flow of high quality pork products. Marel is also working with Frimesa on a pork processing plant in Brazil, which will be the largest and most advanced in Latin America.
Operational profit was 11.4% on a revenue base of € 334 mill. in the quarter. Challenges in terms of logistics and mobility in the quarter were at a greater magnitude than before. Ensuring timely delivery and installation did lead to higher costs in manufacturing, aftermarket and transportation, impacting gross profit. Sales and administrative cost was also at higher levels than in past quarters. Cash flow was robust and leverage was 0.8x net debt/EBITDA at the end of March.
Orders received in the quarter were € 369.4 mill., up 15.5% QoQ and 5% YoY. Orders received in the first quarter include orders from the newly acquired entities of TREIF (meat and other), Curio (fish) and PMJ (poultry).
Marel Meat secured several landmark orders in the quarter, while conversion from pipeline of large orders was soft for Marel Poultry and Marel Fish. The pipeline for large greenfields and modernization projects is building up in all industries.
Covid-19 had an impact on 1Q21 results. As the pandemic escalated in Jan-Feb, stringent lockdowns across several key geographies had an impact on the efficiency of operations. Ensuring timely delivery and installation for customers during a period of significant challenges in mobility and logistics, led to higher costs in manufacturing, aftermarket and transportation.
Revenues in 1Q21 for Marel Poultry were € 159.1 mill., up 5.3% YoY compared to 1Q20 which was a soft revenue quarter for Marel Poultry. EBIT in 1Q21 was € 25.8 mill. (1Q21: 18.2 mill.) and the EBIT margin was 16.2% (1Q21: 12.0%). EBIT was positively impacted by product mix, while lower volume of large projects had a negative impact.
Following the acquisition of PMJ, Marel will expand its third pillar within poultry processing and become the industry’s only full-line provider of duck processing solutions for this large and growing market, where 70% of demand comes from China.
Revenues in 1Q21 for Marel Meat were € 125.8 mill., up by 21.4% YoY (1Q21: 103.6 mill.). EBIT in 1Q21 was € 9.8 mill. (1Q20: 4.6 mill.) and the EBIT margin was 7.8% (1Q20: 4.4%). Profitability in the quarter impacted by mix and lower than expected margins for large projects.
The TREIF acquisition doubled standard equipment sales for Marel Meat and enhanced the full-line offering from post-farm to dispatch of consumer-ready products. Newly launched solutions, SensorX Magna and Accuro, are gaining traction for focus on food safety and sustainability in consumer-ready products.
Orders received in 1Q21 for Marel Meat were strong in both large projects and standard equipment. Landmark deals secured in China and Brazil, as customers pursue greater automation and channel flexibility. Pipeline remains strong.
Market conditions have been challenging due to geopolitical uncertainty and the ongoing Covid-19 pandemic. The company enjoys a balanced exposure to global economies and local markets through its global reach, innovative product portfolio and diversified business mix. At the moment it is not known what the full economic impact of Covid-19 will be on Marel in 2021.
Marel is committed to achieve its mid- and long-term growth targets. The strategic mid-term targets are to achieve gross profit around 40%, SG&A of around 18% and Innovation at the 6% strategic level by year-end 2023. In the period 2017-2026, Marel is targeting 12% average annual revenue growth through market penetration and innovation, complemented by strategic partnerships and acquisitions.